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I have to admit to being surprised by the resilience of equity markets in recent weeks, especially in the developed world.

Despite no sign of relief from the global growth slowdown, despite downward earnings revisions and cautious words from corporate executives, and despite the lack of evidence that policymakers can reverse the drive to depression in the eurozone, equity markets in July built on their strong June gains.

Although I'm underweight equities relative to my benchmark, my portfolio managed to outperform its index in July. The value of my self-invested pension portfolio (Sipp) rose 2.2% during the month and has risen 7.5% since the start of the year. My benchmark (50% UK equities, 25% eurozone equities, 25% UK government bonds) rose by 1.8% on the month and has risen 2.2% so far this year.

My heavy overweight in emerging market equities, where I have 25% of my portfolio and 42% of my total equity holdings, helped performance in the month. My UK equity funds also performed well, with special mention to J.O. Hambro (Equity Income and Opportunity ) and AXA Framlington (UK Select Opportunities ). In my bond portfolio my chosen funds either held their own or slightly outperformed the UK government bond market.

Draghi plays Atlas

The eurozone remains the biggest risk to investors. Following systemic failures by politicians to address the euro’s structural fault lines, the president of the European Central Bank (ECB), Mario Draghi, decided Atlas-like to take the weight of saving the currency onto his own shoulders.

In a speech in London he squared up to financial markets and declared that 'Within our mandate, the ECB is ready to do whatever it takes to preserve the euro – and believe me, it will be enough.' To make sure the point was not lost, he delivered his remarks with a firm voice and a steely stare at his audience. It was about as definitive a declaration of intent as you could get, especially from a central banker.

But was this a Churchillian act of defiance, heralding an impending rout of euro speculators, or a gesture of futility? It was certainly out of keeping with the traditional approach of the ECB to the crisis. Up to now they have made it clear that the solutions to the euro’s difficulties lie squarely in the hands of politician,s and that they had better get their acts together.

Did Draghi’s remarks signal a new source of hope that would bring an end to austerity and a return to growth and financial stability across the eurozone? The markets seemed to buy into it as yields on peripheral country debt fell sharply and equity markets in Europe were reinvigorated.

An effort doomed to failure

But – and I am afraid there is a big but – the task of saving the euro that Draghi seemed to take on is not only beyond his mandate, it is way beyond the ability of the ECB to deliver.

The problem with the euro construct that is driving periphery countries into depression and the eurozone into deflation is not a monetary phenomenon. The fundamental problem is the lack of political structures, institutions and governance behind the single currency. And we can now add to this list the lack of the political will to place the interests of the euro and European integration over domestic interests as Europe fragments politically in the face of the crisis.

Unless the ECB plans a military coup of Napoleonic standards that would give it control of Europe’s governments, saving the euro is way above Draghi's pay grade. The ECB has the means to help mitigate the financial market fallout from (gross) European political bungling, it has the means to help buy politicians time to try and get their acts together, and it has the means to help political leaders sort out the crippled banking system if politicians showed any inclination to do so. But there is no monetary weapon at its disposal that would solve the political deficit behind the euro’s chronic misconstruction.

Still waiting for the 'big bazooka'

Having raised market expectations in such a dramatic way, the market waited for the ECB’s 'big bazooka' that would blast away the Euro’s foes. We are still waiting.

The article is a clear exposition of the political problems overhanging the Euro crisis and the limited effect he ECB may have. But even greater problems lie over the horizon as the USA comes face to face with it own debt mountain and the UK has hardly started to deal with its own huge problem.

Domestic consumption is falling everywhere in the developed world as ordinary people find they cannot borrow more to sustain their standard of living. Interest rates are now so low that personal savings and pension pots cannot support basic needs - they are being spent and depleted. Money savings are losing their value as a store of future support and it is unrealistic to make everyone successful stock market gamblers.

We are entering a situation of hyper-deflation. Instead of needing barrowloads of money to buy a loaf of bread the banks are storing barrowloads of freshly-printed money against debts that will never be repaid. The bread will never be baked! The banking system is now becoming isolated from ordinary people everywhere. Draghi's comments show how rapidly this is happening.

We now need something entirely new to enable the world economy to regenerate without using the old version of money - we need money mk2. Maybe the answer lies in a physical product or barter exchange. Whatever the answer is we need to find it quickly before populations decide to take matters into their own hands to avoid poverty and oppression.

I don't know what the big bazooka could be. There's room for QE, but Germany won't allow large scale money printing. In the long run political union seems completely unfeasible. In the meantime Eurozone debts continue to rise, Greece is a zombie state, Spain and Italy are driving on fumes (from Mr Draghi). What's a boy to do? Jumping on and off the equities merry-go-round is not good for the nerves and sooner or later the timing will go horribly wrong. MoneyObserver may be right on gilts, but they are very expensive and also liable to fall dramatically in value if UK plc gets into trouble. After all, our debt is rising by the day as well. I suspect that cash is the answer right now, which is not so much of a risk as inflation heads down again. The alternative might be German property, with a euro mortgage.

Draghi saying that he will do "whatever it takes" to save the Euro cannot be interpreted as him saying that he will single-handedly save the Euro. Unless you are an idiot or a git.

According to many London based media commentators the deadline for the Euro funeral has passed many times over. In their head it is dead and buried. Scant weight is given to the facts on the ground, chiefly, the one that the Euro shows no sign of going away at all.

The people that use the Euro like the Euro. If you don't know that, then you read too much UK "news"

Even the Greeks, that look to be on their way out after decades of financial mismanagement, would prefer to keep the Euro.

Draghi reflects the will of the players involved to fix the problems that exist. And as long as both EZ business and EZ voters want to keep the Euro, it is never going away.

The wishes of the grossly-misinformed UK public will not be taken into account on this matter.

"Unless the ECB plans a military coup of Napoleonic standards that would give it control of Europe’s governments, saving the euro is way above Draghi's pay grade."

With criminal military coups Britons or Great Britain or U.Kers are familiar. It is hard to forget the barbarian British occupation of Cyprus and the hundreds of hanging the Greek Cypriots patriots. Even today occupying the two Bases of Acrotiri and Dekeleia UK is violating the international law.

I understand your bitterness, but I do not understand your permanent complex wish ful thing to see euro failing. It is denoted at your subtitle " An effort doomed to failure" the correct is "An effort doomed to succeed", you have not under your consideration the Robert Mundell, Canadian Nobelist in 1998 the so called father or grand father of the euro in his work in 1961 of "Optimal Currency Area" (or Region). You will see that to what happens to euro is exactly provided and planned. Do not worry euro has already survived but the third QE of UK is going to cause high levels of inflation some analysts are already talk about the hypeninflation.

Rufus Dogg - you say that those that use it like the Euro - it would be more accurate to say Euro countries populations like their "own idea" of what is the Euro. Their idea relates to the actual usage of the notes and coins and a vague idea of "togetherness" with other Euro countries peoples.

They also like the idea that Germany is always there to bail them all out if it all collapses.

Their idea of a shared currency definitely doesn't extend to giving up any economic sovereignty or having to accept a shared economic discipline that they all owe to one another, their fellow Euro countries - "togetherness" has its limits.

We see in Greece that the Euro is popular,but not the economic discipline, shared with fellow Euro countries, that is required to make the Euro a success.

When you say that the countries of the euro like their own idea of what the euro is, you sum up the problem of the euro and also the 'European project' in general.

It was never clearly defined what it would be, politicians have never been very transparent on the matter, voters themselves have different perceptions and this is symptomatic of the problem with European integration as a whole.

But if you persistently expect to see quick fixes, or instant conclusions, prepare to be disappointed.

"Sovereignty" as you call it is a joke. The countries that are in trouble:

Greece, Ireland, Italy etc. need to be protected from the fiscal ineptitude of their own politicians. Is that something lost, or something gained?

Germany was never seen as any kind of a safety net until such time as a safety net was required. In fact "safety net" is the wrong term, since a safety net can be used an almost infinite number of times. Part of the reason why sorting out a long term solution is taking a long time is because Germany has no intention of playing safety net long term. And everyone knows that.

"We see in Greece that the Euro is popular,but not the economic discipline, shared with fellow Euro countries, that is required to make the Euro a success."

Too true. It appears the Greeks have elected themselves as the sacrificial lamb that focuses everyone's attention on getting it right elsewhere in the EuroZone.

If Greece is as you call it... state (dead returned to life) then your huge country with lots of modern democratic traditional statutes and staffed with unlawful brokers is a well organized boiler room making its living by using double standards and selective memory, tactics that used by those who have nothing to say but BS.

The problem isn't the Euro. The Euro mess is just a symptom of the underlying malaise. That is governments racking up debts they can't repay.

If we take the UK. 1 trillion in borrowing. However, on top is another 6 trillion for PFI, pensions, nuclear decommissioning, expected losses on guarantees ... 7 trillion to be paid from taxes of 0.57 trillion a year. It isn't going to work. Even inflation doesn't work because apart from 0.8 trillion, the debts are inflation linked.

So that leaves defaulting by not paying out on pensions etc. Last to be defaulted will be Gilts, because they will want the cash short term to pay out on the rest.

So given the defaults and the debts to be paid, taxpayers will rationally decided that the government isn't keeping to its part of the bargain, by delivering on services, and delivering on the contracts/promises. They will take the Greek approach and avoid paying taxes.

So I think that governments will raid pensions funds, like Hungary and Argentina. You're locked in.

Second, look at the taxes that can't easily be evaded. Property taxes are high on the list. Having said that property is attractive because its one of the last spending cuts that individuals make.

Hardly. That's how you'll spin it in your own head, no doubt, but the facts remain. Various politicians have spent their various home nations into the ground. Now, as a consequence, the EZ suffers as a group.

If you are to be *directly* impacted by the economic choices of a member state, then there are a few options. But the most sensible would be for prospective budgets to be sanity-checked before being implented.

"OOOH no! God forbid! But now some cluless fuc*wit that has never even run a business doesn't have final say on our nation's spending for the next five years!"

What an awful thing that would be.

Imagine if Labour had to run their spending past a sanity check before it got implemented, eh? Perish the thought.

Rufus, from a relative point of view the UK grew up, as you describe it, ages ago, here in the UK there is some anxiety that our continental cousins will do something intemperate again for us to help put straight; for our part we can only watch and wait, with our own problems.

" Greece, Ireland, Italy etc. need to be protected from the fiscal ineptitude of their own politicians. Is that something lost, or something gained?"

This is absolutely correct for Greece.

Ineptitude of our politicians is given because their election mainly is an outcome of nepotism practice and favoritism. Equally responsible are the overseeing EU authorities too, the European Commission, the European Parliament, the ECB and etc. They do not do anything to confirm what the government reports is true and correct. Why they left the national debt to go so high without reacting. I think Baroso is the number one responsible, the EU leadership too that tolerates unecceptable behavior. For example, it is unbelievable that SIEMENS when was "oiling" Greek ministers the FinMin of Germany did not know it or now after court procedures he does not give the names to the public of the Greek ministers and others who have got money. My belief is that he does not want to reveal it because German ministers have been 'oiled' too.

All these european institutions are being shown to be utter rubbish, staffed by career politicians who are dangerously stupid and self-serving. The Chinese must be laughing up their sleeves. The Euro should be killed off ASAP and the nations should sort out their own problems. I am sick of reading about this ultra slow motion car crash. A pox on the lot of them!

I think Baroso's responsibility is great only in overseeing role. He was seeing the rise of debt and he had the obligation to notify the so called leaders of Greece and at last the citizens of Greece by a press conference if the politicians did not take measures to contain the rise. I am sure that majority of Greek citizens did not know that we were living from lending money. Yes it is shame to do it.

No, I am not lying and I do not care about the so called the Greek statistics. If Baroso had found violations of the established practices he had to take appropriate measures and denounce the governmet.

Doesn't the EU already inform EU governments PUBLICLY when they are living above their means - because this is a provision of the Stability Pact ?.

Even the UK (who elected to have an 'advisory' relationship with the Stability Pact) has received a public smacking of the wrist because the UK government annual spending was in excess of 103% of GDP, and I remember other EU governments being critisised by Brussels at the same time.

War between the citizen and the state - well, yes, that has already begun. But then countries outside the EZ are not immune, we ourselves had serious riots almost exactly a year ago. Now? Not such a problem.

I find your lack of self-awareness insulting. In the real world I have to humor people like you by pretending to agree with your nonsense. I have attempted setting people like yourself straight, at dinner parties and so forth, and I am sad to say that even when it is done in a calm manner, those other people that are self aware frown upon it.

"You know what he's like, just let him think whatever he wants", "you're wasting your breath" etc. That's what people have told me, so now I do what everyone else does: I nod and smile and "ooh yes"

Here, I don't need to show the same restraint. I said you were deluded and gave an example of that in action. Your retort? I am deluded. No example.

But you did fixate on a mention of Spain, despite the fact that it was one of many countries named. No doubt you have leapt to some sort of genius conclusion. Do tell.

Since we were booted out of the ERM we don't get a say in the Euro. If you are sick of seeing the sort of "48 hrs to save the Euro" headline rubbish, then you are not alone. Unfortunately you have made the mistake of taking them at face value.

There will be a single European currency for the rest of your life. The rest of everyone's lives. Even if the Euro did come to an end it would be replaced with a similar model. The countries that use it like it too much, especially for business.

I travel and work in the Eurozone quite a bit. The two biggest differences of people's response come from Ireland and Greece.

In Ireland, most people say the same sort of things: we went too far, it was unsustainable, we spent too much. Most people in Ireland look back at what the politicians did on their behalf, and blame themselves.

But then countries outside the EZ are not immune, we ourselves had serious riots almost exactly a year ago. Now? Not such a problem.

============

1. Quite. It's not a Euro issue. It's a government debt issue, and it particular the debts hidden off the books. Namely pensions. Massive debts, not reported.

Those debts are back end loaded. Very low payments up front, turning into massive payments later. It's a Ponzi.

2. The riots in the UK? Nothing really to do with cuts. All to do with stealing. Just wait until things really kick in.

e.g Means testing state pensions. Cuts in all levels of benefits. Confiscation of pension assets. All for the 'public good'.

When Dave A Chav discovers that he's not going to get his benefits, and that he's destitute in his 'retirement' from not working, its going to kick off. The riots were 5,000 odd stealing. When 100K start looting, what's going to happen? 100K isn't many.

You may have a point worth considering so it is a shame that you damage it with insults - there is plenty of room for differences of opinion and they should be respected.

On your view about a faulty UK perspective on the risk to the euro - (I quote

" According to many London based media commentators the deadline for the Euro funeral has passed many times over. In their head it is dead and buried. Scant weight is given to the facts on the ground, chiefly, the one that the Euro shows no sign of going away at all.The people that use the Euro like the Euro. If you don't know that, then you read too much UK "news" )

- I would point out that the article was written in response to Draghi's own remarks - "... the ECB is ready to do whatever it takes to preserve the euro...". In this case the idea that the euro may require the help of the ECB for it to be preserved comes from an Italian at the top of a Eurozone institution based in Germany. Surely he knows better than those of us gazing in from the outside?

I now leave for 3 weeks away from all the noise of markets and its commentators. I doubt whether the various contributors in these pages will come to an amicable agreement of view while I am away but I sincerely hope they enjoy the cut and thrust of debate conducted in the proper spirit.

"We see in Greece that the Euro is popular,but not the economic discipline, shared with fellow Euro countries, that is required to make the Euro a success."

Because economic discipline is rejected by that ruling class elit of the parties that governed the country. They prefer to do what ever they think than obeying the common reason of governing. If you have a glance into the political system you will see lots of absurdities such as lots of reps becoming illegally richer than they were before enter into the politics. The favoritism and the nepotism are the two other factors that affect the function of democracy in the country where supposed it has been born.

Further to add something at your discussion about War I would like to tell you what Irakleitos from Ephesos was saying about: "Father of all things is war. The constant change of everything and the ideological conflicts of our time. These conflicts of ideas, which were the rules of civil and cultural life of our antiquity and the early of 20th century they have disappeared nowadays."

To Elder One - have to agree with your sentiments - I dropped out of this particular dialogue as soon as the silly and not necessary comments started to flow. Usually this forum is conducted in a good spirit and a divergence of views is all the better for it. But when the basic subject matter is moved to the back burner and replaced by hyperbole etc then it becomes a bore.

The EU already inform EU governments PUBLICLY when they are living above their means - because this is a provision of the Stability Pact ?.

Doesn't the EU already inform EU governments PUBLICLY when they are living above their means - because this is a provision of the Stability Pact ?.

Even the UK (who elected to have an 'advisory' relationship with the Stability Pact) has received a public smacking of the wrist because the UK government annual spending was in excess of 103% of GDP, and I remember other EU governments being critisised by Brussels at the same time.

You are being lied to by the UK media. The above is just one such incident.

That's not my opinion, it is a fact.

Draghi never meant anything of the sort. It is not ridiculous to claim that he did, it is highly disturbing. But, as part of the "boiled-frog" culture within the UK, you judge it as simply a conversation piece.

Much the same way that an American citizen from the bible belt might suggest that Intelligent Design and Evolution are both theories, and therefore both deserve equal weight.

They do not. One is almost certainly correct, the other one should have been shouted-down as nonsense a long time ago.

I only wish I'd started shouting sooner.

This is not a case of "both interpretations have a case" - one is based entirely on lies.

If you wish to check, by all means conduct some research with media sources outside the UK (and avoid Murdoch's USA rags too).

"They do not. One is almost certainly correct, the other one should have been shouted-down as nonsense a long time ago.

I only wish I'd started shouting sooner.

This is not a case of "both interpretations have a case" - one is based entirely on lies.

If you wish to check, by all means conduct some research with media sources outside the UK (and avoid Murdoch's USA rags too)."

Rufus, I take it then that you are against the freedoms of speech and thought; there is an irony in your commentary, you feel free to vent your opinions (with bile) yet would attempt to deny others their beliefs, even if misguided.

A further note, clearly you do read the Telegraph newspapers otherwise how can you contend they are liars, despite the truth or not of that, bear in mind the rest of us are able to draw our own conclusions from the media in all its facets, or do you claim omniscience.

On a closing note, the only fact in all of this affair is that we - Europe, including the UK - are all in the shit/scheissen/merde/doodoo call it what you will.

Hey guys, lets not get too personal, we can all be bigots and therefore we can all have different immovable opinions - not based on facts but probably based on some random voluntary brainwashing during our earlier lives. That's why we occasionally vote in those incompetent governments.

My own brainwashing suggests that Rob may be off the mark and that Draghi will in fact do what is necessary to maintain the Euro currency.

Yes, it needs the threat of a bazooka but in reality behind that threat will be a more human determination to keep kicking the can along the road for as long as it takes.

Remember this is a huge debt crisis which will run for many years and will get worse before it gets better. It can't be solved quickly but my gut feel is that at the end of the road the Euro currency will be intact courtesy of the ECB - but with a few less A1 members. In the meantime our own government has to follow its inevitable path of reducing public debt, helping to create more private jobs and repairing the banking industry which is so - so - essential for prosperity to return.

john r. I agree with you. For a long time I thought the Euro would break up, but now I don't - and I don't count Greece leaving as a break up! It may do, but in essence the rest of the Euro area will stay the same.

The crisis will be solved over a very long period (tens of years?) by constant can-kicking against a backgroud of the fundamentals being altered - political unity and loss of sovereignty gradually taking place - a shift to central control and administration of banks and all things financial, including, of course, spending by the governments within the EZ. The French may not like it, but "they ain't got no option", and of course all the argument, discussion, and negotiation will involve every country defending to the last its independence of financial action - that's why it will take years. But it will be done!!! The politicians are protected from the consequences of this monumental cock-up! They will be okay, as they always are - with their high salaries and inflation proofed pensions! Its the rest of society - the ordinary people, who will carry the loadv and pay the price.

I agree completely with your description of processes that will happen over the next decade, but not with your prediction on the final outcome.

There has never been a successful currency union without continuous and perpetual Transfer Payments from richer regions to poorer regions - in the Euro context this would be between richer sovereign countries to poorer sovereign countries.

My prediction is that this will never happen.

As for Rufus predicting that if this European currency fails a successful replacement will follow, this really is holding faith in defiance of evidence on a par with the subject of Creationists rejecting Evolution that he has introduced into the discussion.

Thanks you Money Observer. I am no expert, but I think if you look at the off-referred-to USA, you will find that a number of states, mainly in the South - Mississippi, Louisiana, Arkansas et al, were the equivalent to the "peripherals" in the EZ. They stayed in the Union partly because they were defeated in the Civil War, but otherwise for much the same reasons that the "peripherals" allegedly choose to stay in the EZ - they liked to be part of a single currency.

However, they have paid heavily for membership along the way; their economies have always lagged behing the other states, and they have been locked in and have suffered low pay and investment, hence standard of living. A bit of a mirror of whjat the EZ is going to be like - and the USA did have all the political and fiscal centrality that the EZ lacks!

So the EZ is not going to be good for the "peripherals" but the hubris of the politicians will keep it going - regardless. They have their plush working conditions, pensions and huge perks. The poor just pay for them and suffer.

Daresay the Euro will survive, the question is, as what; a possible outcome is that the German people could decide they wouldn't put up with the logical outcome of keeping the Euro alive as it currently exists and persuade their rulers to pull out, joined by some other northerners of a like mind, thus leaving the rest to adjust to reality.

My own feeling is that for the UK this would be no bad thing, after all do we want a Grosser Deutschland on our doorstep, but at the same time I don't think they want to be that there either.

Whatever the solution, it's going to be messy but that outcome could be the quickest, better that than drag it out interminably.

I am willing to bet you mean UK newspaper, right? Because if I pick one, that tells you everything you'd need to know about me, since they're generally one of two dull and predictable flavours.

Honestly, I don't "like" any of them. As I have stated, I have a problem with the fact that we are being lied to. In order to actually like a UK based newspaper, they'd have to stand up and start reporting the unspun facts.

And then ridicule the other media outlets that report idiocy, such as the above article.

If you prefer your information on Europe and the Euro in a less sensationalised and significantly less misleading format, and still need a newspaper in English, then the Irish Times is not too bad. But the only real way to know what people think, or even what is happening in Germany, or Italy is to read their newspapers. A lot of them have English versions online.

"Rufus, I take it then that you are against the freedoms of speech and thought;"

Nope, just that there is a huge and gaping gulf between facts and opinions. They are not interchangeable, they are not the same thing, and they do not have equal weight.

"there is an irony in your commentary, you feel free to vent your opinions (with bile)"

See, this is where you are falling down. You think I am disseminating my opinion, you are disseminating yours, and they are both equally valid.

My position is that your opinion is invalidated. Not by my opinion, but by the facts of the matter.

"A further note, clearly you do read the Telegraph newspapers otherwise how can you contend they are liars, despite the truth or not of that, bear in mind the rest of us are able to draw our own conclusions from the media in all its facets, or do you claim omniscience."

Yes, I do read the Telegraph.

Drawing your own conclusions is one thing. The problem is that people rarely challenge the conclusions they have either already drawn, or as in the above piece of journalistic crap, are presented with.

"On a closing note, the only fact in all of this affair is that we - Europe, including the UK - are all in the shit/scheissen/merde/doodoo call it what you will."

That is the only fact? No, it is not the *only* fact. But you are right about one thing, it is at least *a* fact. On that much I think we can agree.

There is a famous saying in Psychology that "perception is reality" - it is knowingly fallacious, but illustrates that which is observed: people act as if what they believe is true. Whether it is true or not true is not relevant to how they act, only whether they *believe* it is true or not true.

And people in the UK - as you do - believe that the Euro is fu*ked. If you think that has nothing to do with the media, I have to ask the obvious question:

If it is nothing to do with the media, where else are you getting your information from, and how have you reached that conclusion?

The "Phoenix" Euro theory is one that I am confident in. A single currency is too useful for business; too easy to use.

I was a financial analyst based in Frankfurt 20 odd years ago. I was there for the change. I saw the difference between doing business across Europe with national currencies, and how it all worked after.

"After" is a breeze. That genie is well and truly out of the bottle - the amount of effort, stress and loss involved in transactions in multiple currencies mean that a single currency of some form is here to stay. Of that there is no question.

"a possible outcome is that the German people could decide they wouldn't put up with the logical outcome of keeping the Euro alive as it currently exists and persuade their rulers to pull out, joined by some other northerners of a like mind"

The only place this idea has any traction is in the UK. It is not a hot topic in Germany, or the Netherlands, or anywhere else for that matter. It is highly unlikely. You are missing one of the key elements to a "single" European currency. And do you honestly think that having 2 currencies will make things any easier? It is a UK-centric head-in-the-sand solution.

"after all do we want a Grosser Deutschland on our doorstep" what was that you were saying about bigots?

" but at the same time I don't think they want to be that there either." Yeah, no sh*t.

"Whatever the solution, it's going to be messy but that outcome could be the quickest"

People in the UK are looking for the quickest solution. Due in no small part to the newspapers persistent "the sky is falling, expected to land within 48 hrs!!"

There is some sense of urgency within the EZ, but their focus is on the long term. Which is complicated.

Rufus - I dont disagree with you about the quality of the UK press, however there are plenty of opposite views between the Guardian/Observer views and the Telegraph views, so I cant see that they can all be parroting some centrally

determined 'establishment view' on this particular subject..

Never read The Irish Times - do they articulate any downside to being a member of a currency union ?

Rufus, I worked in finance for quite a while, particularly on computerisation of Foreign Exchange business.

Obviously much of FX dealing was just trading and speculative, conducted soley for my company's proprietary gain.

But much of it was also for my companies industrial clients, trading with foreign customers (the old original purpose of FX dealing), and this was huge, straightforward, and simply routine, completely negating any disadvantages that the two parties were in countries with different currencies.

The single currency has surely not produced that much benefit in ordinary trade that didn't have a problem to begin with.

If it is nothing to do with the media, where else are you getting your information from, and how have you reached that conclusion?

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1. The Eurozone has committed the same errors or fraud as the UK when it comes to government debts. Governments have taken money for pensions, spent it, leaving massive debts. Debts they can't pay. So going forward, as the cashflows go negative, they will go bust.

These pensions systems are pay as you go. The reality is you pay, and your money goes. Now most were cashflow positive. They were paying out less than the income. However that is just the indication that you have easy debt payments now, but massive payments later. ie. The debts created are back end loaded.

If we take the UK, you can calculate the present value of the debts. For the civil service pension its 1.5 trillion. For the state pension its 2.4 trillion. Add up the rest and you get to 6 trillion on top of the 1.1 trillion borrowing debt that is admitted too.

Now given the state pension in the UK isn't generous compared to the rest of Europe, you just know that the rest of Europe has the same if not bigger problems.

As an aside, if the median wage earner in the UK, 26K per year, had put their national insurance into the FTSE, they would have had a pension of 19K, instead of 5K. That's the extent of the rip off.

So its government debts that the issue. The Euro has just exposed that as the problem, not caused anything. If we take Greece, the solution is to devalue. However, that rips of the creditors, pensioners.

There will be a single European currency for the rest of your life. The rest of everyone's lives. Even if the Euro did come to an end it would be replaced with a similar model. The countries that use it like it too much, especially for business.

By the way Rufus, could you be so kind to give your reasons why you were booted out of ERM? It was a George Soros's speculation game or a political painful decision. U.K. was going to be the first in ERM and the stronger leader of all EU nowadays? The fact that Churchill's offsprings were leading Europe would make Germany's nazis sick.

Money Observer, I don't impute "success" to the eventuality that the Euro keeps going. I simply say it will keep going - because of political hubris. Personally, because of the results of the experiement, I think it is a disaster. The fact that business finds it easier to trade does not, in my view, make it desirable or justify the experiment. In fact I believe the contrary is the case.

I have always been against the Euro because it will homogonise national charateristics and individuality - make everyone more like the Germans, if you like! I love Europe because of its national diversity (A diversity which is very largely lost in the USA) Now, because of the Euro and the need it engenders to unite politically, I see national differences being eroded in the future. I'm 68, so it won't affect me, but I feel intensely sad for future generations!

I also do not subscribe to the theory that the Euro will stop Europeans fighting each other. In the modern context, that is a completely and utterly irrelevant argument in my opinion. The last war was started because Hitler was able to rearm in secret. You couldn't do that now. Modern technology - satellites etc -means that no country in Europe could build up the military position to attack everyone else without it becoming absolutely obvious what their intention is. And we are much more civilised now, and public opinion holds much more sway, and international processes - largely led by European countries - are much more effective at preventing international conflicts.

I still hope the Euro will fail, because I think Europe would be a much better and more interesting place without it.

On interesting historical item is to look at Italy during the Renaissance. Why was it so successful? Several things come to mind.

1. The removal of serfdom

2. The competition between city states.

3. The introduction of banking.

If you look at EU states, serfdom is has come back, because people are by and large in debt servitude to the state. Competition between states is being stiffled. For example, tax harmonization and the EU preventing devaluation. We've also got massive attacks on banking in general, rather than the illegal practices.

"Nope, just that there is a huge and gaping gulf between facts and opinions. They are not interchangeable, they are not the same thing, and they do not have equal weight."

Rufus, You bend logic with such statements, of course facts and opinions are different entities yet you imply by your manner your opinions are nonetheless facts; in any case if they are entirely different parameters in the equation, how can weightings apply at all.

I am intrigued to know how you have gathered the opinion that some of us - notably those in apparent disagreement with you - sole source their information from UK newspapers, which you rubbish, when we all have access to the same international media; I'll overlook the obvious inference of devine intervention somewhere.

Facts in the case comprise measured data and official written texts, which by individual considerations give rise to various conjecture, opinions and whatnot, ofttimes coloured by wishful thinking of a broader context, more or less; in that, none are different whatever their conceits. Nothing wrong with a bit of wishful thinking, but it its no great shakes, probably even a cretin can know that.

Some of the other assertions you make in that post aren't worth an acknowledgement.

I would add Rufus, that some of us had worked out the nonsense of a euro without much attention to opinions wrought in the media, from awareness of the broad brush of human nature, its egos and conceits, constitutional history, basic economics, national conflicts, etc, it ain't rocket science; conditioning if you like, but of which newspapers form a very small part.

On one other point I will comment, I personally an engineer at the age of 82 would like to see some evident progress to a solution to the mess that is the European condition brought about by financial incompetences before I snuff it, so Rufus if you know all the answers get to work and sort it out.

Nickle, we agree I think; in making a judgement at all about the subject source of this commentary it's almost impossible to define relevant and true facts at all and how to use them in a determinant equation in any meaningful way.

But then haven't the relevant facts of finance already been pretty well evaluated and found to be dire? What we are seeing now is Europe confronting the hard to digest political consequencies of a solution, the matter of which has been discussed interminably, add to that the consequencies of defaults on debt and whatnot. Observers can only guess based on gut feeling sentiment.

But then haven't the relevant facts of finance already been pretty well evaluated and found to be dire?

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I disagree. It's dire, and that's without the relevant facts being evaluated.

Take the UK as an example. Still AAA. Now remember AAA means the ability to repay Gilts. Nothing about repaying any other debts.

So we have hard facts for the level of Gilt borrowing. 1.1 trillion.

We have some soft facts for the level of Civil service pension debts. Government quotes 1.35 trillion (not on the accounts). However even this figure is distorted down. The pensions are linked to inflation. However, they assume they hold corporate bonds rated AA and that they never default. That is because they want to make the debt look smaller. To do this you need to inflate the discount rate and assume no defaults.

So if its 1.35 trillion for a small number of civil servants, what's the figure for lots of people on the state pension? Doesn't take a rocket scientist to work out its going to be a large figure.

Now you can work it out in different ways, and the state pension debt is around the 2.4 trillion mark.

Total up all the debts and you get to 7 trillion. It's pretty close to the actual figure.

Now this has to be paid out of tax. We have accurate figures for taxation. 570 bn last year.

So 7000 / 570 = 12 times geared.

Yep, the UK government is bust. It can't afford to pay those debts off. It can't inflate its way out of those debts, because those pensions, they are linked to inflation.

So what's it going to do? The only things it can do is to take more money, cut spending, default on the pensions.

So taking more money means more taxation, or taking the Hungarian option, taking all pension funds that have assets.

Cut spending? Well that has been increasing year on year, above inflation. They aren't very good at this are they?

Default on the pension? Well its already happened. For a median worker on 26K, if they had put their money in the FTSE, they would have a pension of 19K a year, inflation linked. They get 5K a year. Effectively a massive tax on the poor. Now raising the retirement age 2 years, means they pay another 9K in NI, plus they have lost 2 x 19K in income. Total loss 47K to the government.

That's why the government is keeping quite. It dare not reveal the extent of its theft.

Now look at Europe with their more generous state pensions. Work out what's going to happen there. Not pleasant at all. Worse than dire.

So it is possible to put numbers to the mess. Governments don't want to.

MO -re FX. It is true to say that large firms would hedge - at a price - but it wasn't something that was done for every transaction.

Nor was it something that was open to everyone.

And locking-in exchange rates is only one small part of the equation of having multiple rates.

For example, when a European conglomerate planed it sales in the EU, it made those plans in, for example, DMs. Then, the data comes in during the year in local currency for each country, which then has to be converted back into DMs. But there is a variance between the exchange rate the revenue was planed at, and the rate at which they occurred.

The exchange variance has to be backed-out, and that's a process that is long, boring and, of course, subject to error.

A single currency across everywhere really does make every aspect of business a hell of a lot easier. It has simplified everything, and business will not gladly give that up.

Rufus Dogg, you may not like it being called and experiment, but in my view that is exactly what it is - and experiment, the outcome of which is uncertain, both as regards durability and the benefits or otherwise produced.

Yes Rufus, they are, but then you are so consumed by wishful thinking and resentful arrogance that calm reason and logic seems to elude you.

Frankly I've had enough of your nonsense and will leave this string, you may have the last word should you wish, but I will part with the observation of an earlier remark of yours; some, about Europe may like the Euro but that don't mean they'll be able to keep it, some may, but trying to preserve it roughly as it is, is already causing considerable political stresses especially for Germany. Much as you seem to despise the notion of tribal sovereignty it isn't dead however grown up you wish to think Europe has become. Mr Draghi can contend, but he can't save the Euro on his own, Germany for one may decide the cost of preserving a pride driven venture isn't worth its inherent inequities, on current evidence no one can be certain of the outcome.

It is no more an experiment than the decimalisation of Sterling, or the UK's membership of the EU - note that our continued membership of the EU is not guaranteed. But it is not an "experiment" either.

Calling it an experiment illustrates a misunderstanding of what the Euro is.

"Wishful thinking and resentful arrogance"? What do you think I would say of you?

" trying to preserve it roughly as it is, is already causing considerable political stresses especially for Germany." People are hardly taking to the streets in Germany. So far the Germans have held their line and the majority of Germans are satisfied. "Pleasant" is probably not the word to describe it, but then I don't get the impression that they're having too many sleepless nights either.

"Mr Draghi can contend, but he can't save the Euro on his own," He never, at any point, claimed that he could.

"Germany for one may decide the cost of preserving a pride driven venture isn't worth its inherent inequities,"

It isn't a pride driven venture. The Euro has proved popular for business, popular with governments and popular with the day to day users of the currency.

" on current evidence no one can be certain of the outcome."

I can be fairly certain that for years to come the UK papers will go on misreporting the facts and predicting the Euro's immanent demise while the politicians take their own sweet time hammering out the new rules and regulations.

It isn't a pride driven venture. The Euro has proved popular for business, popular with governments and popular with the day to day users of the currency.

===============

There is a huge amount of pride involved Just listen to interviews with Greeks. On your other points, I think I'd agree too.

However, you've missed off the main problem. Governments have massive hidden debts they can't pay. The consequences of that are dire, and exacerbated by the inability to devalue, or to take the painful decisions on defaulting.

The Greek economy is still collapsing. That means the Greek's can't repay the money thrown at them. They never will.

So inspite of the voter's desires, desires won't work.

Now one option is that they default, but stay in the Euro. This is the option that is not discussed. There are plenty of countries where they use another countries currency. I can see that happening. So I think the Euro will survive the default of Greece.

However, I have doubts that it will survive the default of Portugal or Spain.

Even with Greece, the default takes out the ECB. How do you rescue the ECB when its bankrupt?

To say that there is a fair dose of pride involved does not mean that it is pride-driven, which is what was said. Would you describe, say, football as pride driven? Pride can be a factor without being any kind of driving force. For those inside the Euro at least.

Ironically, I suspect that the UK's position on the Euro - endless willful misinformation - is pride driven. Since we got kicked out f the ERM the Euro is the sourest bunch of grapes ever, as far as we're concerned.

Up to the point where a lot of people don't even recall that we were kicked out of the ERM. They think we decided to leave. The revisionist history goes that far.

As for the ECB - all the medicines available have side effects. Right now they have decided that riding it out is better than taking any medicine. There may come a time when that changes. As a central bank, they have all the options that other central banks have, so I am not too concerned about them going bankrupt.

It seems to me that the markets are now falling over themselves to buy at least Italian and French debt. Or are they?

There seem to be indications that purchases of debt are largely coming from within the EZ and the sovereigns who are selling the debt. The rest of the World seems to be passing up the opportunity. How correct that is, I don't know.

Rufus - you keep referring to the UK being 'kicked out' of the ERM - we weren't.

We left because it was the best thing for us to do for our economy (and so it proved), just as one day both Germany and Greece might leave the Euro if they come to the conclusion its the best thing for them to do.

Looking ahead its not easy to see how long term membership of the Euro, for different reasons, is going to be in the interest of the Greek and German people.

We broke the rules of the ERM trading bands and were forced to leave. We had NO CHOICE IN THE MATTER. We were expelled. The UK dropped the ball, very very badly. We looked an ass on the world stage. It got so embarrassing that my international Financial Analyst colleagues at the time stopped taking the mick out of the UK - at least in front of me.

One of the most bizarre things to come out of the whole Euro escapade is the UK folk-memory myth that we *chose* to leave the ERM and we *chose* not to join the Euro. We made no such choices at all.

The only choice we ever made was to join the Euro. That's why we joined the ERM in the first place. The closest we have come to making a choice to not join the Euro was when Blair and Brown came to the decision to join "when the time was right" - again, not a choice to "not join," a choice to "join later." That's as close as we have ever got to deciding to not join. But it is not what people think.

I dare say that if any decision was taken *now* it would be different, but let's not digress from the historical facts.

If you don't understand the facts that brought us to where we are, what chance of a making sound judgments on what is currently happening?

As with any systems of analysis, there is a tendency to "garbage-in garbage-out"

If you, and a lot of the rest of the UK can be so very wrong about something so simple and so basic as our expulsion from the ERM, perhaps there is a lot more of the Euro story that has become warped from fact into nonsense?

As someone that is aware of this happening, I have to say that I think it is time that we woke-up to the reality. This revisionist history and endless negative spin are very unhealthy - to the point of being downright sinister.

And then your application to ERM had poor planning and preparation. The fact that every citizen has lost 17 pounds per capital is a good deal of money. But the most of all is the humiliation of your financial management which received is the real expensive and unbearable matter. Unless Soros had insider information and did the enormous gains called the Sterling killer. He thinks that is a celebrity and important person. He is nothing but an international liar trying to imitate Warren Buffet who indeed is a great investor.

I am not so sure that there was anything wrong with the application, or planning process, at least in the case of the UK - Greece is another matter. The problem for the UK came during the "execution" phase, where the currency speculators of the world lined-up against the Pound and the BoE persistently under-reacted, and then, when they finally did act to defend the Pound, they over-reacted, sealing the fate of the GBP and thereby the UK's continued existence in the ERM.

It was a huge humiliation at the time. A humiliation that has been expunged from the collective memory. And it does not appear in the current distorted narrative.

This "we chose to leave the ERM" nonsense is ubiquitous, and an indication of quite how twisted the facts of the matter have become.

Correct. The ERM is long gone. No one gives a toss and the vast majority in the UK do not even know what it is.

The interesting bit, is that the UK left, let the currency float, and did well out of it. The performance of the economy post ERM was much better.

That's the lesson for Greece and the other countries. However pride won't let them leave. So that means 6% off GDP, and more to come. The Euro and the fraudsters in the Greek government are leading the Greeks back to a peasant economy. That's the sad part.

You are right to say that the ERM is long gone. But I think that important facts should not be forgotten, glossed over, or, as with our collective memory of the ERM, changed beyond all recognition into something very different from reality.

And you are also right that our expulsion allowed the pound to fall (sink more than float) which itself ushered in the real green-shoots of recovery that the Gvt had tried and failed to talk into existence for years.

But I fear that Greece will not have such an easy ride as we did. If they leave the Euro the process will be calamitous (for Greece) on a scale not yet seen. More likely to be akin to Argentina in 2002 than the UK in 1992.

In that sense, it is not pride that is keeping Greece in the Euro, it is fear. Not so much fear of the unknown as fear of the likely. Who will buy their Drachma? No one. They won't even want them themselves. There will be a humongous capital flight out of Greece.

Enormous inflation. Crippling interest rates. Both of which would be in double figures, at a conservative estimate.

And extreme poverty too. Leaving the Euro will not help Greece avoid cataclysm. It will induce it.

That does not mean that there is a whole heap of choice in the matter.

Comparing our exit from the ERM to the exit of Greece from the Euro is like comparing a rock pool to the Atlantic. There are some notable similarities, perhaps, but they are not on the same scale.

"The problem for the UK came during the "execution" phase, where the currency speculators of the world lined-up against the Pound and the BoE persistently under-reacted, and then, when they finally did act to defend the Pound, they over-reacted, sealing the fate of the GBP and thereby the UK's continued existence in the ERM."

If Great Britain was in the EMU it would be leader and things would be different for the benefit of all E.U. Germans were trying to show leadershim while they had not. Remember the unification of two Germanys is a myth and the western used it to obtain resources and money. The Eastern Germany of 16.000.000 who came into the west but they were coming into the EU too and E.U had to pay for that. Yes Maastricht is in 1992 and the fall of the shame wall was on October 3, 1989. The time limits are so clear tose days.

You did not tell me about Sioros? Were his gains honest or he had insider information and got lots of Sterlings? I think he had the information from USA that GB must not go into EMU and stay outside.

As per Grexit please, have some gentlemen to read the Canadian Nobelist Robert Mundell's "The Optimal Currency Areas" or "Region" he called the father or grand father of the Euro and to what happened to Euro is planned and expected to happen.

Yes, you are right when you say the differences of exit from ERM and EMU (Euro) the fact is that if you exit from EMU it may be similar to a collapse of a building the whole building is destroyed and remains only the ground thay has to be shared between the former partners.

Soros - some people think he was a genius, some people think he was a villain.

If he had been a UK citizen, I might be inclined to think that he could (arguably) have done something wrong. But I find it hard to blame him for anything and at this stage it seems moot. He profited; the BoE lost.

Does that make him a genius? Not necessarily. The flip side of the transaction is that someone at the BoE could have been incredibly stupid.

Soros was part of a market that had lost faith in the GBP and the BoE steadfastly ignored that fact for months. So far as I recall, by the time the BoE offered 2p per £1 above the going market rate (GBP/USD) it was too late. Rather than calming the markets and inducing a 2p rally, as the BoE expected, it looked like a desperate act from a bunch of clowns. It did not have the desired effect.

No insider knowledge was required. The BoE did not try to influence the market secretly, they announced their plans. It is hard to believe that they could have orchestrated the whole thing. It looks like a rubbish plan that backfired.

It all played out in public, and in real time.

It was clear at the time that there were going to be big winners (and losers) and it just so happens that Soros was the biggest winner by far - it looks like nothing more than right place/ right time to me.

In that sense, it is not pride that is keeping Greece in the Euro, it is fear. Not so much fear of the unknown as fear of the likely. Who will buy their Drachma? No one. They won't even want them themselves. There will be a humongous capital flight out of Greece.

Enormous inflation. Crippling interest rates. Both of which would be in double figures, at a conservative estimate.

===========

So what have they know? 6% off GDP, and no signs of it changing.

Huge cuts to pensions, because the state is bust. It took the money up front, and now can't pay.

Interest rates? The banks aren't lending anyway, they are bust.

Flight of capital? It's already checking out.

In or out, they are condemned. They don't deserve that. It's straight up fraud by politicians. The government will default. Pure and simple. It can't pay back the debts because the population can't or won't.

On the scale of damage, the ERM doesn't register, I agree.

However, the Greek problem is the same as the problem in the UK. Fraudsters running government and hiding debts. That's why the Greeks are the warning, because the same will happen here.

Throughout history, civil wars are mercifully rare. And generally preceded by wars of independence.

Significantly more likely as an outcome for (for both the UK's debts and the Eurozone) is some form of compromise.

What you are suggesting - in the form of, for want of a better word "revolution" - is not impossible. But my guess is that it is improbable.

I would be surprised if things in the UK ever got back to as bad as they were in the 1970s again in my lifetime. Riots, demonstrations, strikes, 3 days a week of electricity, rubbish and finally unburied corpses piling up in the streets - like I say, I'd be surprised to see that here again.

In the UK, government debts come to 7 trillion, not the published 1 trillion, because they haven't included the pension debts, PFI, guarantees, etc. The really big numbers are off the books.

Now before you say that's rubbish, the AAA rating just relates to paying borrowing, not to repaying any of the debts above.

So for each taxpayer (30 million, on median income of 26K) , the debt per head comes 230K. It's not going to be repaid.

You can look at it another way. 7,000 bn / 570 bn tax revenues. Over 12 times geared.

So that means defaulting on state pensions, civil service pensions. If you default on Gilts, it takes out the people forced to lend to the government. Namely banks (and hence their creditors), insurance companies, and annuitants, as well as lots of pension funds.

Now when that happens, there will be enough people who will take things into their own hands.

Agreed. It's only the part of the state pension where people have paid in the past. ie. Accrued rights that matter. That is a debt.

Same with contracts for civil service pensions. Future rights - not a debt. Passed accrued rights - a debt.

All of this is standard accounting policy.

Similarly with guarantees. Here its not the sum insured that is a liability. It is the expected losses on the insurance that is a liability.

Total them up, over 7 trillion. On 'income' of 0.57 trillion.

***

If you want to stress yourself out there are probably easier ways, but whatever works for you, mi amigo.

***

It's not me that is going to be stressed.

You can't pay future teachers salaries, doctor's salaries, all spending, and pay the past accrued debts at the same time. The debts are 12-13 times earnings. That gearing is above the level that bust RBS, and RBS's expenses are small in comparison. Government spending on teachers, doctors and the services is massive.

So work through the consequences. Things have to give.

1. The debts won't be paid

2. The debts will partially be paid

3. Tax take will rise, if possible (Laffer curve)

4. Services will be cut.

So with such a large percentage just one week away from being destitute in the UK, and no pension provision bar the state, its going to be dire.

When the UK was unable to keep the pound within agreed trading bands it could have requested that the trading band limits be relaxed - this was done at the time for other ERM countries so that they could remain within the ERM - so clearly this was an option that the UK chose not to use, but chose to leave the ERM instead and not remain inside within relaxed trading bands. Good decision

And then later still the trading band limits of the ERM were relaxed even more becoming so wide that no remaining ERM country would ever be likely to be unable to sustain their currency within agreed limits - the ERM became almost meaningless.

I would add that the new "super relaxed" individual currency trading limits made the ERM became almost meaningless - even though absolute strict adherence to the carefully negotiated original limits was to be the very foundation of Euro membership itself.

In other words the foundations were crumbling even before the Euro building was assembled on them.

As far as the Blair/Brown decision for the UK to join "when the time is right", and your suggestion that this actually amounts to a positive decision for the UK to join the Euro later, it doesn't ,because this formula of words clearly allows for the possibility that the time might never be right .

I had intended to make no further utterances to this string but have followed it nevertheless for my education; MoneyObserver makes the point that had already occured to me, but a further point occurs, surely for the UK to have been "thrown out" of an arrangement legally and unilaterally a writ of some sort would have to have been served; was it?